Why Summer Infant (SUMR) Stock Is Jumping Today

NEW YORK (TheStreet) -- Summer Infant (SUMR) was gaining 48.1% to $2.46 Wednesday after beating analysts' estimates for earnings and revenue in the first quarter.

For the first quarter Summer Infant posted earnings of 5 cents a share, beating the Capital IQ Consensus Estimate of a loss of -1 cent a share by 6 cents. The company posted revenue of $50.81 million for the quarter, while analysts expected revenue of $45.22 million.

Following the earnings report Roth Capital upgraded Summer Infant to "buy" from a "neutral" rating.

TheStreet Ratings team rates SUMMER INFANT INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate SUMMER INFANT INC (SUMR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself, generally high debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Leisure Equipment & Products industry. The net income has decreased by 10.0% when compared to the same quarter one year ago, dropping from -$1.53 million to -$1.68 million.

Net operating cash flow has significantly decreased to $2.01 million or 56.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Currently the debt-to-equity ratio of 1.94 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SUMR's quick ratio is somewhat strong at 1.07, demonstrating the ability to handle short-term liquidity needs.

Looking at the price performance of SUMR's shares over the past 12 months, there is not much good news to report: the stock is down 36.50%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

The gross profit margin for SUMMER INFANT INC is currently lower than what is desirable, coming in at 32.26%. Regardless of SUMR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.75% trails the industry average.